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Backseat Driver: Oil prices, silver linings and olde gas pumps

Oil prices are now over $127 a barrel, gas prices are fast approaching $4.00 a gallon ($2.79 in Jamestown Thursday evening) but George W. Bush was unable to convince Saudi Arabia to increase oil production when he met with King Abdullah on Friday.

So prices are expected to keep going up (although some see a bubble of speculative buying causing a drop at some point) with Goldman Sachs revising its forecast from $107 to $141 a barrel for the second half of the year. It had earlier talked about $150 to $200 a barrel.

The surge in energy prices is certainly spelling an end to the era of cheap oil. When I covered the industry in New York in the early 1980s, it was all about supply. OPEC was the name of the game and every meeting of the oil ministers held the potential of an immediate increase or decrease in the price of oil depending on whether they decided to up, hold or lower production.

Today the name of the game is demand, especially from the growing mega economies like China and India.

But the serendipitous silver lining to this cloud of smog is that it is forcing us to economize and find alternative sources of energy just as concern over global warming is getting ever more serious.

Indeed, just this week, the Interior Department declared the polar bear a threatened species because of the loss of Arctic sea ice.

GM has apparently gotten the message, with a new advertising campaign focusing on its smaller cars, according to thecarconnection.com citing a report in the Detroit News. Apparently, the company had been “holding out hope that U.S. truck sales would rebound.” Yes, and I expect to win the lottery.

And then there was this story from The New York Times about old fashioned gasoline pumps being unable to register a price of more than $3.99 on their dials – or a sale more than $99.99.

It said there are about 8,500 service stations out of the nation’s total of 170,000 that are equipped with these old pumps. Unfortunately, such stations tend to be Mom-and-Pop operations that cannot afford to upgrade or replace them.

Posted by Peter C. T. Elsworth  at 1:50 PM to commentary | Permalink | Comments 0

Oil pushed above $127 a barrel for first time

Oil prices soared more than $3 a barrel, surpassing $127 for the first time Friday and putting more pressure on already lofty gasoline and diesel prices ahead of the summer driving season in the northern hemisphere, according to the Associated Press.

Also pushing oil prices up were speculation that China's demand for diesel needed to fuel its power plants would rise due to reconstruction efforts after this week's earthquakes and an upward revision of an oil price forecast by investment bank Goldman Sachs from $107 to $141 a barrel for the second half of the year.

Light, sweet crude for June delivery on the New York Mercantile Exchange rose as high as $127.82 a barrel in electronic trading by afternoon in Europe, before retreating to $127.55, up from Thursday's close of $124.12.

Posted by Peter C. T. Elsworth  at 10:32 AM to Crude oil market | Permalink | Comments 0